Surge in Ford Short Interest, Up by a Third

As of the March 31 reporting date, short interest in Ford Motor Co. (NYSE: F) surged 32.7%, from 82.9 million shares to 109.98 million shares. That’s the highest level of short interest in the stock since last November. The stock ranked eighth among the NYSE stocks with the largest number of shares short.

The huge number of short shares represents just 2.8% of Ford’s total float, however, and based on the average daily volume, days to cover is just over two.

General Motors Co. (NYSE: GM) also saw short interest surge in the last two weeks of March, up by nearly a third (31.1%) to 56.59 million shares. That was 4.2% of the carmaker’s float, with a days-to-cover number of three.

The sharp rise in Ford’s short interest is likely due to a couple of elements. First, and worst, the company issued an earnings warning for the first quarter of 2017. Ford set earnings per share (EPS) guidance for the first quarter in the range of $0.30 to $0.35 for both GAAP and adjusted EPS. This is lower than the auto manufacturer’s EPS in the first quarter of 2016 as a result of higher costs (including commodities, warranty, and investments in emerging opportunities), lower volume (primarily fleet) and unfavorable exchange (currency).

The consensus estimates had been $0.47 in EPS and $34.91 billion in revenue for the first quarter. In the first quarter of 2016, Ford reported EPS of $0.68 and $35.26 billion in revenue.

Then shortly before March sales were due to be released, analysts forecast that Ford’s unit sales would drop by 7.5% year over year. As it turned out, sales were down 7%, but that news came after the short interest period was over.

Finally, Ford’s Lincoln division is getting caught in a new initiative by luxury carmaker BMW that promises 40 variants of the company’s various models, giving consumers far more choice than either Lincoln or GM’s Cadillac.

Shares closed at $11.28 on Tuesday, up about 0.3% in a 52-week range of $11.07 to $14.22. In the two-week short interest period that ended March 31, Ford’s stock dropped about 7%.